U.S. Stocks Advance Following Biggest Drop Since 2011

Traders work on the floor of the New York Stock Exchange. Photographer: Scott Eells/Bloomberg

June 21 (Bloomberg) -- U.S. stocks advanced, rebounding
following the Standard & Poor’s 500 Index’s biggest drop since
November 2011 after Federal Reserve Chairman Ben S. Bernanke
said the central bank may phase out stimulus.

Consumer-staples, utility and health-care shares rose the
most out of 10 S&P 500 groups, while technology and raw-material
companies retreated. Procter & Gamble Co. and Coca-Cola Co.
gained at least 1.6 percent, pacing advances among the largest
U.S. companies. Oracle Corp. tumbled 9.3 percent after reporting
a second straight quarter of sales that missed estimates.

The S&P 500 rose 0.3 percent to 1,592.43 in New York at 4
p.m., after fluctuating between gains and losses during the day.
The Dow Jones Industrial Average gained 41.08 points, or 0.3
percent, to 14,799.40. About 10.7 billion shares traded hands on
U.S. exchanges, the highest since October 2011, as futures and
options contracts expire today in a process known as quadruple
witching that can lead to unpredictable price swings.

“To me this is just a normal correction reacting to some
unexpected news,” Laszlo Birinyi, president of Birinyi
Associates Inc., said in an interview with Trish Regan and Tom
Keene on Bloomberg Television’s “Street Smart.” “I still
think you’re in a bull market.”

The S&P 500 sank 2.5 percent yesterday as global equities
tumbled after the Fed indicated June 19 it may start paring
stimulus measures as soon as September. The benchmark index has
declined 4.6 percent since its May 21 high amid speculation the
Fed will scale back quantitative easing. Central bank stimulus
has helped fuel a rally in stocks worldwide and lifted the S&P
500 as much as 147 percent from its bear-market low in 2009.

5 Percent

The S&P 500 has rallied 149 days without a retreat
exceeding 5 percent or more, data compiled by Bloomberg show.
Last year, the index dropped 7.7 percent from a Sept. 14 peak
through Nov. 15. The current streak has been the longest without
a 5 percent drop since a 173-day stretch ended Feb. 20, 2007,
about eight months before the financial crisis sent the market
plunging 57 percent.

Economists have increased forecasts that the Fed will trim
its monthly bond purchases to $65 billion in September and end
buying in June 2014. In a Bloomberg survey of 54 economists
conducted June 19-20, 44 percent saw a tapering in September, up
from 27 percent in a June 4-5 survey.

Fed Bank of St. Louis President James Bullard today said
the central bank had “inappropriately timed” its decision to
lay out a plan to reduce the pace of bond purchases.

“A more prudent approach would be to wait for tangible
signs that the economy was strengthening and that inflation was
on a path to return toward target before making such an
announcement,” Bullard said in a statement today.

Volatility Index

The Chicago Board Options Exchange Volatility Index, the
measure of options on the S&P 500 known as the VIX, fell 7.8
percent to 18.90. The gauge surged 23 percent to 20.49
yesterday, the highest on a closing basis since Dec. 28. The VIX
has soared 67 percent since hitting a six-year low in March.

Facebook Inc. increased 2.6 percent to $24.53 after adding
video to its Instagram photo-sharing service for smartphones,
stepping up competition with microblogging site Twitter Inc. The
new feature lets users capture, upload and share clips as long
as 15 seconds, Kevin Systrom, Instagram’s co-founder, said at an
event at Facebook’s headquarters in Menlo Park, California.

Rising Rates

Equity Residential rallied 3.4 percent to $54.73. Real
estate investment trusts with shorter-lease terms, like
apartments, may be well-positioned for rising rates, Morgan
Stanley analyst Haendel St. Juste wrote in a note.

Oracle lost 9.3 percent to $30.14. The world’s largest
maker of database software reported fourth-quarter profit
excluding some items of 87 cents a share on sales of $11
billion, missing analysts’ average estimate for profit of 87
cents on revenue of $11.1 billion, according to data compiled by
Bloomberg.

The shares fell even as Oracle doubled its quarterly
dividend, added $12 billion in buybacks and applied to list on
the New York Stock Exchange.

Darden Restaurants Inc. sank 2.2 percent to $50.12. The
operator of restaurant chains such as Olive Garden and Red
Lobster said earnings in 2014 will be as much as 5 percent below
2013 profit.